Interview with the President of the Republic of Costa Rica, Luis Guillermo Solís

Can you give us an overview of the UK’s relationship with Latin America?

President Solis: Britain and Costa Rica are no strangers to each other - we have had a long standing relationship since the 19th century. It began with our coffee exports more than 100 years ago but nowadays it has diversified to a broader commercial exchange. At present it is an exciting time in the relationship. On one hand we have Brexit, which offers a chance for us to reset our interactions along bi-lateral lines. But also we have the incredible diversification of the Costa Rican economy, which is creating new trade opportunities. The recent decision of British Airways to launch a direct flight between London and San Jose was an important step for both countries. We already have record amounts of Brits visiting us and I am confident that the flight will boost business deals too.

How will the arrival of President Trump impact Costa Rica?

PS: I am sure that it will have a big impact. Whoever is president of the United States that country will always have a large influence in Latin America, Central America and, of course, Costa Rica. For example, 50% of our foreign trade is with the US. However, I don’t think that we are in Mexico’s situation as Cafta (the Central American Free Trade Agreement) is viewed very differently by the Americans than their deal with Mexico. I was in the US recently, speaking to high-level government officials and I don’t think Costa Rica has anything to worry about on the trade front. Of course there are other key issues, such as immigration, an ultimately we will have to wait to see how things play out. But I am not overly concerned about President Trump, nor do I think Costa Ricans should be.

Costa Rica has the pro-tempore presidency of Sica; how do you hope to reform the organisation?

PS: Our focus has been on looking at the agreements that already exist and have not been implemented. There are thousands of deals that have been made but not enforced, so we are lagging behind. Clearly it is not realistic to implement all of them but I would like to see us revisit the 2010 San Salvador agreement, which proposed important reforms. I don’t think we can implement all of that deal because we don’t have the consensus now that we had then but I think it would form a good starting point for the reforms that are needed.

"There are thousands of deals that have been made but not enforced, so we are lagging behind…"

The second point is that I think we need a streamlined policy for key issues, such as migration, security and the environment. Given that all of the Sica members face similar threats from climate change we should learn to speak as a region on the issue. The Paris Agreement it is an opportunity for us to show real global leadership. The isthmian nature of the region means that we all face a problem of littoral erosion. In Central America we also have immense biodiversity that needs to be preserved. Crucially our development needs means that that environmental conservation has to come with human involvement.

Why should LatAm INVESTOR readers invest in Costa Rica?

PS: I have two words for your readers: human talent. Costa Rica is not a cheap country and our workforce is not cheap but it is highly profitable. We have been investing in education for many years and the capacity of Costa Rican workers is well known and recognised by companies from all over the world. The best proof of that is the number of international firms that are doing incredible things with Costa Rican workers. We have seen investment in high-tech areas such as the manufacture of medical devices, while information technology companies like Microsoft and Intel are now creating and designing products here.

But if human talent is our main strength, there are also plenty of others. The stability of the political system, our respect for the rule of law and the dynamic local economy all reassure investors that are making long-term investments. It also helps that we are one of the safest countries in the region and one of the most enjoyable places to live.

Many new political parties and pressure groups have appeared in Costa Rica; does the lack of consensus threaten future development?

PS: Yes there has been a change in the Costa Rican political system but I am optimistic. It is true that there is not a nationwide consensus on many important issues but that is not necessarily negative. The old two-party system collapsed because of corruption so what we have today is a vibrant society trying to find new ways to resolve key issues. As a historian I can tell you that every time Costa Rica has had a crisis and had to resolve a problem it has done so by achieving unity. Even if you look at the most serious episodes in our past, such as wars, we have always emerged stronger from them.

In recent decades Costa Rica has struggled to build the infrastructure its growing economy needs; will that change?

PS: I hope that by the time this administration ends we will have finished key works and people will realise that Costa Rica can build new infrastructure. We are building several new bridges, a large new convention centre and a series of aqueducts on the Caribbean Coast that will benefit 21,000 families. Part of our success has been that we have worked with multilateral organisations to secure funds for projects. For example 117 schools are being built in a deal that was negotiated with the Inter-American Development Bank.

"Costa Rica’s infrastructure deficit is a challenge that outlasts any one government…"

Of course Costa Rica’s infrastructure deficit is a challenge that outlasts any one government and I hope that we have created the foundations for future administrations to continue building. I have just enacted a law to facilitate Public Private Partnerships, which are the ideal way to develop projects that are too large for the government to undertake. For example the new airport that we are building to serve the capital city will cost $2billion, so it will need private-sector involvement. There is also the potential for a ‘dry canal’ linking sea ports on our Atlantic and Caribbean Coasts that could need up to $16billion of investment.

Costa Rica’s fiscal deficit caused recent ratings agency downgrades; can your government fix the problem?

PS: I believe that the fiscal deficit is Costa Rica’s biggest challenge. For 15 years governments have been trying to pass the fiscal reform needed to tame the deficit. Our strategy was to break down the big reform that couldn’t be passed through Congress into nine smaller parcels. During this government we have managed to pass six of those. The three parts that haven’t passed are the most important as they involve reforming our sales tax, increasing income tax and enshrining fiscal discipline into law. These final measures have been stymied by opposition lawmakers but the problem will not go away as it needs to be resolved for us to enter the OECD. As a government we can present the proposals – and they were fine measures endorsed by institutions such as the World Bank – but ultimately only the Costa Rican Congress can pass it.

But despite the impasse at Congress we have still managed to achieve a lot. We cut the deficit to 5.2% per year from the 5.9% that we inherited. That came via our success in increasing the efficiency of tax collection. We have stamped out on evasion and increased our tax take by 15% in 2015 and 14% last year. I still hope that perhaps we can get one more part of our reform passed before we leave government.

How do you hope this government will be remembered?

PS: We will be remembered as a government that ruled without corruption. Perhaps that should be an automatic expectation and not a great achievement but at this moment in time in this region, it has to be seen as a success. It’s a reminder that democracy can be virtuous. After all, we will be handing over a country that is at peace with itself and benefiting from economic stability.